Closing off our Fintech A to Z, we look at fintech’s verification challenges, its gender gap and the opportunities within the youth market.
The bottom of the fintech alphabet is an exciting space. We have movers and shakers dreaming up novel new ways to authenticate transactions and exchange currencies, and a little-known region called Zug driving digital currency innovation.
But, for all its forward-thinking, fintech still suffers from one of the oldest of business ailments: a troubling gender gap. Women in fintech are shifting stereotypes, while market observers are pointing to a generation of highly-digitised millennials as a key target audience for new and innovative products – all of which is creating a more diverse business culture.
Countering fraud and verifying payments is one of the hottest spaces in fintech right now, not only because it is the lifesblood of finance, but because it is also resulting in new and novel ways of paying for goods.
While Apple’s fingerprint recognition platform Apple Pay has yet to arrive in Ireland, it is catching on like wildfire in the US, the UK and China, where the majority of banks have implemented the service. Apple Pay uses a dedicated near-field communication (NFC) chip called the Secure Element. For extra security, Apple doesn’t store credit card numbers, just the device numbers.
Apple Pay has been live in the UK for the past year, where it has been adopted by all of the banks. In recent weeks, it emerged that Google plans to bring Android Pay to the UK.
Android Pay allows any device running Android 4.4 or higher and fitted with an NFC chip to enact contactless payments at point-of-sale terminals in retail outlets. UK banks that have signed up to support the new mobile wallet include Bank of Scotland, First Direct, MBNA, Halifax, HSBC, Lloyds, M&S Bank and Nationwide.
Unfortunately, every time a new verification platform like fingerprint recognition is conceived, hackers are hard at work finding new ways around it. Researchers were recently able to prove how the fingerprint sensors on Samsung and Huawei scanners could be fooled using tools including an inkjet printer.
This is propelling fintech giants to come up with new and more novel means of verifying payments. At Mobile World Congress this year, MasterCard, which has its global R&D headquarters in Dublin, revealed how it plans to accept selfies and fingerprints as an alternative to passwords and codes to accept online payments. After a successful trial of 750 users in the Netherlands, it plans to roll out the new facial recognition system in a further 14 territories in Europe and North America. Amazon is also working on a creative solution and has just filed a patent to allow shoppers to confirm purchases by taking a photo or video of themselves.
You’d be forgiven for thinking fintech was a bit of a boys’ club, considering finance and technology are both sectors dominated by men. In fact, you wouldn’t even be wrong.
Out of 150 global financial institutions, only 4pc were led by women in 2013, according to the Oliver Wyman Women in Financial Services report. In tech, 38pc of the top 150 Silicon Valley firms don’t have a single woman on their boards, according to Fenwick & West’s Gender Diversity in Silicon Valley, let alone having any in leadership positions.
At junior employee level, the picture is no better. Gender gaps in technology and finance are much talked about and much maligned – particularly in tech, where companies publicly reveal woeful diversity stats. Apple’s tech staff is only 22pc women, for example. Facebook is at 16pc, and Twitter a lowly 10pc.
Knowing that the problem exists in finance and technology hasn’t prevented that gender gap from filtering into their offspring, fintech. However, that doesn’t mean that there are no women in the sector at all. Fintech is a relatively fledgling industry, and there are already women making waves at the top.
Banking is one of the oldest professions in the world, and currency exchange has been around as long as we’ve been trading with other countries and moving around this Earth. With fintech, though, it’s experiencing a rebirth of sorts. Individuals and businesses used to be entirely at the mercy of financial institutions when it came to changing money into other currencies, or transferring money around the world, and exorbitant fees were a regular fixture of the process.
Now, many of these same transactions take place in the online sphere. The proliferation of peer-to-peer currency exchanges like CurrencyFair and TransferWise have cut out the need for an intermediary (banks), making the entire process vastly more affordable for everyone, from large corporations to the average person.
Digital natives, millennials, Generation Z – whatever you want to call them, it is clear that younger people are the natural consumers for fintech products. Free of the brand loyalty that often shackled their parents’ generation, under-35s are digital natives who are happy to try different things if they feel it will give them the best deal.
According to EY, the use of fintech is skewed toward younger, higher-income groups. In their research, conducted towards the end of 2015, about one in every four respondents aged 25 to 34 had used at least two fintech products in the last six months, with 21pc of 35-to-44-year-olds engaging with fintech, and just less than 18pc of 18-to-24-year-olds.
Younger non-fintech users are also far more likely than older non-users to say they plan to give additional fintech products a try in the future. If they behave as they say they intend to, nearly half of all digitally active consumers aged 25 to 34 will be fintech users in the near future.
In financial services, Z is for Zurich. In fintech, it’s all about Zug.
Back in the 1940s, this Swiss canton (a territorial district) established the lowest tax rates in Switzerland. Fast-forward to the 21st century and it has become home to about as many commercially-registered companies as human citizens. For years a popular location for commodities trading, in more recent times the tech companies have started to move in, attracted by security, privacy, a highly-educated workforce and innovation-friendly structures.
In this hotbed of business, finance and technology, a strong start-up community has germinated in the fintech space – particularly in digital currency, prompting the nickname Crypto Valley.
While much of the content you find online hailing Zug as the fintech centre of the universe is sponsored by Swiss authorities, its status has more energetic cheerleaders in the cryptocurrency community. In Switzerland, cryptocurrencies are treated as any other foreign currency, so there’s no need to wait for new legislation to facilitate this emerging technology and it is exempt from VAT. Unsurprisingly, then, blockchain-based trailblazers are setting up shop, encouraged by Johan Gevers, CEO of mobile transaction platform Monetas and a champion of the Zug fintech scene.
Ethereum – just one of the major fintech start-ups with a base in Zug – is one that excites the cryptocurrency community. The brainchild of 22-year-old Russian programmer Vitalik Buterin, Ethereum could bring blockchain technology beyond financial transactions with a platform based not on a cryptocurrency unit, like bitcoin, but a crypto-asset called an ether.
Last year, IBM unveiled its experimentation with Ethereum and the internet of things and, more recently, revealed how the expansion of distributed ledger technology can have much broader business applications. For example, shipments travelling around the world could be fitted with sensors reporting information back to a blockchain. In this scenario, all parties would be able to access verifiable records of the shipment so if, say, an entire shipment of food was spoiled, there’s no need for an intermediary to step in to conduct contract resolution and auditing.
The complete fintech A to Z
Young women on smartphones image via Shutterstock